A primary economic activity refers to any kind of economic activity that involves collecting, extracting or harvesting natural resources. There are two types of products that can be produced from primary economic activities.
- Products that are harvested or extracted and can be directly consumed without being processed or converted into another form. E.g., Fruits, vegetables, and other agricultural or animal produce.
- Products that are harvested or extracted but cannot be directly consumed without being processed. These products are used in other industries as raw materials and are processed to produce finished goods that can be used by people. E.g., Cotton is a raw material that cannot be used directly but can be processed to produce clothes. Similarly, wood cannot be used directly but can be used to build furniture and housing, among others.
Before learning more about primary economic activity, you will have to first understand the meaning of the term ‘economic activity’.
Economic Activity: Meaning and Types
All activities involved in the exchange of money or production of goods and services that satisfy some or all the needs of consumers are considered economic activities.
Typically, there are three types of economic activities:
- Primary Economic Activity – As defined above, primary economic activity is deeply connected to the earth’s natural resources and occurs where people stay close or are in touch with any of the earth’s natural resources such as land or water. E.g., Agriculture, fishing, mining, etc
- Secondary Economic Activity – All activities involved in the conversion of raw materials extracted from the primary activities into finished products to be used by consumers are secondary economic activities. E.g., Production and manufacturing
- Tertiary Economic Activity – All activities involved in the transfer and distribution of tangible and intangible goods are tertiary economic activities. E.g., Services
Primary Economic Activity Example
Company P is engaged in the mining and extraction of iron ore from mines in the state of Minnesota. The company uses a combination of technology and manpower to perform this activity. Since the core activity is the extraction of a natural resource, we can classify Company P to be engaged in a primary economic activity.
Company S is a steel manufacturer in Minnesota. Since iron is the primary raw material required to make steel (along with carbon), Company S purchases large quantities of iron from Company P. Here, Company P’s primary output is being used as an input to manufacture Company S’s main output. Therefore, Company S is engaged in a secondary economic activity.
Company T is a banking company which finances major industries and businesses. Both Company P and Company S have a line of credit from Company T to carry on their primary activities of iron ore extraction and steel manufacturing respectively. Since Company T’s business activity involves financially supporting the smooth running of the businesses of Company P & Company S, Company T is said to be involved in a tertiary economic activity.
Primary Economic Activity: Industry Classification
We can use The North American Industry Classification System (NAICS) to classify the following industries and their products as primary sector industries:
- Agriculture, Forestry, Fishing, and Hunting
- Crop production including oilseed and grain farming, vegetable and melon farming, fruit and tree nut farming, greenhouse, nursery, and floriculture production, and other crops (tobacco, cotton, sugarcane, etc) farming.
- Animal products that include cattle ranching and farming, hog and pig farming, poultry and egg production, sheep and goat farming, aquaculture and other animal production
- Forestry and logging inclusive of timber tract operations, forest nurseries, and gathering of forest products.
- Fishing, hunting, and trapping and
- Support activities for agriculture and forestry
- Mining, Quarrying, and Oil and Gas extraction
- Crude petroleum and natural gas extraction
- Coal, iron ore, copper, gold, silver, and other metal mining
- Stone, sand, gravel, clay, ceramic and refractory minerals, and other nonmetallic mineral mining and quarrying and
- Support activities for mining
Primary Economic Activity Analysis
Primary economic activities are vital not only for the economy but also for the sustenance of the human race. One can even say that primary economic activities form the ‘building block’ of other economic activities. Whether it be agricultural or animal products, crude oil extraction or coal mining, the world has come to depend on these essential commodities on an ongoing basis.
It is estimated that around 40% of the world’s workforce is employed in some form of primary economic activity. Unfortunately, the percentage of the world’s population involved in these activities has been reducing gradually over the years. These activities are now mostly confined to under-developed or developing countries where a majority of the population live in rural areas and come from low-income backgrounds.
The developed countries have moved up the value chain and are focusing mostly on tertiary economic activities such as the services sector. Unlike primary economic activities that utilize more land or other natural resources but produce less wealth, the services sector generates the most wealth.
But all said and done, economic growth depends on the sustenance and co-dependence of all the three types of economic activities. While primary economic activities act as the building block for secondary and tertiary sectors, the primary sector needs the expertise of the secondary and tertiary sectors to improve its productivity and performance. The mutual interaction and relationship among the different economic activities are crucial for the sustenance and growth of the world’s economy.
Primary Economic Activity Conclusion
To sum up:
- A primary economic activity refers to an economic activity that involves collecting, extracting or harvesting natural resources.
- The goods produced through a primary economic activity can either be consumed directly or can be used as a raw material to produce or manufacture a different product.
- Primary economic activities can be considered the building blocks of secondary and tertiary economic activities.
- The percentage of the world’s population engaged in primary economic activities has reduced drastically over the years.
- The percentage of the labor force employed in primary economic activities is higher in developing economies as compared to developed economies
- The world’s economy depends on the sustenance and co-dependence of all the three types of economic activities